Congratulations, you have an accepted offer and are in escrow. Escrow can last from 21 days to 60 days with 45 being average. This is the period where things get serious and your real estate agent really earns their money. It is also the most stressful time in a real estate transaction. But it doesn’t have to be if you are prepared and have written an offer that meets your needs and capabilities. By that I mean what you can afford to spend on repairs if needed and still make sure your lender approves your funding to close.
To avoid delays in the escrow or even the possibility of the contract being cancelled you must know what your lender requires to get you the funds to close. If your loan is an FHA, Freddie Mac or Fannie MAE type loan the lender is going to want the property to be safe and free of health hazards. That means if you had a pest inspection you will need to have a clear report – free of any section 1 items (Termites, termite damage, fungus, wood rot, etc.). To avoid hassles and further negotiations regarding repairs make sure when you are writing your contrat to purchase the property that you include language that dictates who is responsible for the repairs. If you get this settled up front then your escrow will be a lot smoother and less stressful.
Just read this from the California Association of Realtors: On average, inventories of California homes priced less than $300,000—the most-popular price point for foreclosure buyers—have shrunk from a nearly 10-month supply a year ago, to less than a three and a half-month supply in July, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
Instead of holding onto homes in hope for the best offer and in the process incur additional expenses like property taxes, maintenance and utilities costs, the banks are selling these homes as quick as possible.
What’s ahead – more foreclosures and an increase in inventory. I don’t anticipate a glut of properties coming on the market as in 2007 and 2008. Rather to keep prices from dropping they will gradually release them. As we know, the lower the inventory the more it becomes a sellers market. And a sellers market means that prices generally go up.
Thanks for reading.
Wow how a few months can change things. At the start of this year we had a high inventory and prices were dropping weekly. Then something happened and everything changed. What happened was the banks took a moratorium – meaning they stopped putting the properties they had foreclosed on the market and they stopped foreclosing on properties. I don’t think they completely stopped the foreclosures but they sure did stop putting houses on the market. This created a shortage of housing inventory. And with interest rates being so low there are literally more buyers than houses right now. So today’s current market conditions are very different than when we started the year. With a shortage of inventory and a large number of buyers – mostly first time buyers and investors – every property that is in somewhat decent shape is getting multiple offers and selling for over the asking price. This is good news for homeowners but creates a tough market for buyers – kind of what it was like in 2004 and 2005 only prices are much lower.
I am told that the banks are going to start releasing the properties they have in their portfolio but at a slow pace so as not to flood the market. This will keep prices from dropping too fast if at all and may increase prices. So if you are keeping up with the news about the housing market and have seen where prices have started to climb a bit it can be explained by the lack of inventory.
Does this mean you should buy right away? That depends on each persons individual situation. Certainly investors are buying. Most are buying to hold and rent the property thinking we have hit near the bottom of the market. As for individuals, you should consult a real estate professional and if you have one, a tax professional. But one rule is still holding true – buy for the long term if you are going to buy.
Thanks for reading!
